Market Plus: Ted Seifried

Jun 19, 2020  | 14 min  | Ep4544 | Podcast

Podcast

Yeager: This is the Friday, June 19, 2020 version of the Market Plus segment. Joining us now, Ted Seifried. Hi, Ted.

Seifried: Hi, Paul, thanks for having me. How's it going?

Yeager: You know, I've got to say, let's give a little admission f what's going on. We have some COVID situations that prompted us to do a little bit of an audible with our production, so henceforth you are there, I am here. I hope my wife doesn't get too mad at me. She said that my background had been too cluttered so I reduced it. This is a picture that was something that we pledged at Iowa PBS for a view above Iowa, so that is the Iowa Capitol and a truck from the time before and Mark Pearson's bobblehead is there. And you're in a hotel room.

Seifried: Yes. I am. And this behind me is apparently a local bike trail here in Des Moines.

Yeager: Oh, it's the High Trestle Trail. Now I see it. Okay. This whole virus thing has impacted the economy, we saw retails sales jump 17.7%, people were going back out to shop. But now all of a sudden, we talked about it a little bit during the show, there's some reemergence of the virus in some of these warmer areas. In general, what is the virus doing to commodities now? Anything?

Seifried: That's a very deep and complex question. I think the first way that we're going to start with that is what is it doing for the stock market. And while you had a little bit of trepidation this week, for the most part that stock market has come roaring back off of lows. Now, personally I don't know if I really trust that. You still have a lot of people out of work and you can throw as much stimulus at the economy as you want, but with people not working, people unsure about their futures, I think we're on some fairly shaky ground as far as the stock market is concerned. But investors when they see the stock market in particular start to bounce back they're going to run after it, chase it, say hey I missed it, now I've got to chase it and it is what it is. As far as commodities are concerned you look at crude oil which is up 300 something percent, we have the initial lockdown where we just stopped driving, well traffic has gotten pretty bad around Chicago. We are driving around again. I don't know where everybody is going, to be honest, but we are driving again. As far as corn, as far as soybeans, it really never had that big of an impact in the first place because we're still feeding animals. And while we did have plant shutdowns, well that just meant instead of growth rations we're going to maintenance rations, we're still feeding, we're still crushing, we're still exporting, at least soybeans, corn is a struggle. But yeah, I really don't think it has a profound effect on commodities specifically, at least that's not the perception right now. If this gets worse again that could change. But as I was saying earlier, I have the unpopular opinion that the recent spike in cases that we've seen from COVID is actually a really good thing because of the timing of it. We wanted to flatten the curve so we didn't overwhelm the hospitals, we turned the third largest convention center in the world, the McCormick Center in Chicago, into a COVID overflow emergency unit. Three people have ever gone there and it isn't because we had hospitals overflowing, it's because we had to test it out. Now the politicians are bickering about who is going to pay to take it down. So we flattened the curve, if we're going to fight this thing as a country, as a nation, we should do it during the summer months when we all as individuals have a better chance of beating it and as a whole we have less of a chance of overrunning hospitals that are already dealing with flu victims or flu patients, which by the way the flu last season killed 61,000 people, that is an issue. We don't want to have those occurring at the same time. So now is the time and a lot of these counties that I have people in, people that I talk to, these cases are up but it's not necessarily that they are major hospitalizations, people are fighting for their lives, a lot of them are people that have it that barely have symptoms of it. So, again, I'm unpopular opinion. I think the spike in cases that we're seeing right now in June is a positive thing for our country as a whole.

Yeager: Okay, I need to answer some questions that come in via Facebook and Twitter and I also have a surprise, you have a surprise in a moment. But that just kind of gives it away I think right now what we're doing. Cotton wise, China has been the fundamental push. Is there technical things in play?

Seifried: Yeah, so also fundamentally there are some dry spots throughout the country. Western Plains, we're looking at the Eastern Seaboard as being maybe slightly concerning so that could play into it although we're not to the point where we have a big issue yet. We're going to be eyeing that. We've run smack dab into the 100 day moving average, that has been a formidable foe here for the last two weeks, we've hit it maybe 7 or 8 times, not being able to clear it to the upside, but we really haven't backed off of it either. To me it feels like cotton is coiling to try to make a push higher. But it would be nice to get some sort of fundamentals spark, say a great sale to China or something like that, to push us up and over. But to me that cotton chart looks good, December cotton $59.80. I'm seeing 66 to 69, somewhere in that range.

Yeager: All right, Craig in Minnesota is asking, will the June ending stocks report be a market mover for either corn or soybeans?

Seifried: June ending stocks, what I'm assuming is that is the June planted acreage and quarterly grain stocks report. Quarterly grain stocks could be a big mover for corn or soybeans if we miss it. As analysts if we miss it by a long shot then it can definitely be a big mover. We haven't put together our guesses for that. I'm working on that right now, we'll be submitting those next week as will all the other analysts that contribute to those polls. So I hesitate to really answer that question until I see what the average trade guesses are. But I will say this, corn is the one that I'm really curious about because we know we lost a lot of corn demand for ethanol. USDA to this point has been kind of guessing on that. This will give us a very solid idea of what that actually is. So I think we'll be expecting a really rather big and bearish number for corn. The surprise to me would probably be that maybe it isn't as bad. Like I said, without knowing the average trade guesses it's really hard to make a guesstimate on what we'll see as far as the market is concerned.

Yeager: I've asked you one political question, I might as well as you another one. Phil in Dresden, Ontario is asking, are the stage 1 soybean commitments from China going to happen this year? We did talk about that a little bit in the program. As in are U.S. soybeans on the cheap side of global prices? Or do we see China waiting until November 4th, that is a presidential election response question.

Seifried: Yeah, I think you've got three different questions there, Phil. For one, there's some I guess miscommunication about what we mean by the year, the first year. It seems to me that a lot of us wanted that to mean the marketing year that ends September 1st, the corn and soybean marketing year that ends September 1st. It doesn't seem like listening to Lighthizer talk the other day it sounds more like calendar year. And so I think we look at it from a calendar year perspective which just makes things kind of awkward when we look at balance sheets and things like that. But when we look at things from a calendar year perspective China has really started to pick things up lately and they could potentially hit that 36.2 or whatever billion dollars of U.S. agricultural goods by the end of December if they continue to really snowball these purchases that they have started recently. I think really what we should be looking at and what I believe the market is now looking at is the new crop sales. We have a fair amount of sales on the books for new crop. If China, talking soybeans, if China does start aggressively buying soybeans I'm going to say the USDA's number for export is really low. I would actually say it's maybe too low already. And if that's the case and we're only looking at a 395 million bushel carryover with a trendline yield right now we could have a situation where we easily could run out of soybeans and have to price ration exports. We might have to price ration our exports to China. Now, that actually might be a good thing for China because to hit the higher dollar amounts it would probably help them to have prices, soybean prices $2 higher. Personally, if I'm China and I see this scenario I think hey, it would be great for me to come in and buy the board, i.e. hedge my future purchases at $8.60 November beans, I'm sorry $8.80 November beans, as I'm buying start buying some cash, let the market rally $1.20, I take the hedge and I pay higher dollar amounts therefore pushing myself closer to that bigger commitment that I have. I see an opportunity there and I'm not exactly sure why China hasn't really done that. Maybe it is in their plans, maybe they're waiting for the right timing of it, but that would just make a ton of sense for me. If anybody has any ideas on that, by the way, tweet at me @thetedspread. I'd love to hear that.

Yeager: I'm sure you will, we usually get some responses about that. I have another political question I could get into but I do have one more here. Brian in Keystone is asking, Ted, do we store our corn or soybeans this fall?

Seifried: Do we store? Okay, so are we going to -- a lot of guys last year were bagging corn, bagging beans, but we do that every year. It really comes back to how you've marketed, right, if you've been making new crop sales and you've got December '20 corn sold at $3.80 plus, no, take it to town. But for things that you haven't sold a lot of that is going to depend on where we are at harvest or what opportunities we get between now and harvest. If we do get a chance to sell $3.85 corn between now and November take it and bring it to town. But yeah, if we don't get that chance to sell higher prices, storing yes, we're going to be looking at that. And I'm not saying that's the right thing to do, I'm just saying that's what we will be doing because that's generally speaking what we do do. I think we're going to get a good chance to sell some higher priced soybeans during the marketing year and hopefully that will give us the chance to sell some corn at better prices too.

Yeager: Oh, sell corn, that reminds me, we have one more thing we have to do. You brought something with you on your trip. Are you bullish at all about corn? You kind of were during the show. Are you bullish enough to put a hat on?

Seifried: I think we could see some fund short covering happen. And by the way, this is the COVID corn hat, it is corn but it's masked up. I only have one of them and we have to keep it safe. You know what, I'm in a hotel room, it's fine, there we go. But for the flight we've got to use the bag. I'm bullish we could see some short covering in corn. I'm not necessarily bullish the fundamentals that we have. I don't think we're going to lose enough acres in corn, I don't think we're going to come far enough off the trendline yield and I don't think we're going to have a huge surge in demand in order to get us through a tight situation on a corn balance sheet. I do think it's going to be better than what the USDA is currently looking at right now as long as something catastrophic doesn't happen like we've seen catastrophic events happen time after time after time again over the past few years, short of another black swan, a whole flock of black swans, I do think that corn balance sheet is going to end up better than what we're looking at right now. But I don't know if it's going to be to the point where we need to talk about $4.50 corn, things like that. That story for me is in the soybeans but I don't have a soybean hat, Paul.

Yeager: Not yet. But if you know how to get one tweet at him and tell him it's in the mail, he'll send you his address.

Seifried: All for that, yes. No cheesehead hats, I'll leave that to Naomi. That's not for me.

Yeager: There's territories carved out, I get it, totally get it.

Seifried: Also, Go Bears.

Yeager: Exactly, all right, Ted, thank you so much, appreciate it.

Seifried: The pleasure's always mine, Paul, you take care.

Yeager: Okay, you too. That will do it for Market Plus. That's Ted Seifried. Thanks for watching and bearing with us here on these ever evolving changes. Next week we're going to be talking about the carbon market and how it's entering into the commodities and Tomm Pfitzenmaier, we'll see what kind of hat he wears and where he joins us from. For all of us here at Market to Market, have a great week.

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